Chiquita Banana slips on its own peel

Banana company Chiquita Brands International Inc. (NYSE:CQB) settled its suit with the U.S. Justice Department. Chiquita agreed to pay a $25 million fine for aiding and abetting terrorists in Colombia. The DOJ alleges that Chiquita paid $1.7 million over a 7 year period, 1997-2004, to the right-wing United Self-Defense Forces as well as to the left-wing Revolutionary Armed Forces to protect Chiquita operations and employees. Chiquita executives said that the payments were to ensure the safety of its workforce and were not meant to take sides in Colombia's civil conflict nor support Colombia's cocaine trade. Unable to secure its operations in Colombia despite paying off both sides, Chiquita sold its Colombian operations in June 2004. It is worth asking where all the U.S. aid to Colombia went and why none of it seems to have been used to protect American commercial interests in Colombia. Perhaps its easier to fault the company rather than U.S. policy.

But being accused of consorting with terrorists was not the only bad news for Chiquita. 2006 was a bad year for bananas. In recently released fourth-quarter 2006 earnings, Chiquita experienced a 4% growth in its "European banana regime," despite no one knowing quite what that phrase means. Net sales were up 9% to $1.1 billion, yet the company suffered an operating loss of $34 million, including the $25 million set aside to pay the fine. Banana sales were up 11% to $495 million, but nonetheless showed an oeprating loss of $26 million for Q4 2006. Fresh Cut packaged salad sales were flat at $256 million, but showed a $9 million operating loss over consumer concerns about tainted spinach. Not a good year!